Expanding on the idea of “more competition in the services sector”

We’ve established in the past that, when looking at productivity, it is important to answer questions about “why” productivity is doing what it is doing and why we care.

Having accepted that there are industry specific differences in productivity between New Zealand and Australia (a relatively comparable nation), the Productivity Commission has been focused on competition in the services sector – which includes many of the underperforming industries.  Although they’d identified occupational licencing as an issue previously, they are putting that to the side to now (although that and patents are still areas of interest), and in their new report are focusing on two things:

  • stimulating a more competitive environment; and
  • the successful adoption of information and communications technology (ICT) by service firms.

Discussion below the flap.  Update:  I see the PC has a summary and an infographic.  Nice.

The report is very detailed, going through a lot of literature and ideas on why competition matters, the trade-offs involved (a recognition I enjoy), and drilling home the importance of information issues in the market.  The Productivity Commission seems to be interested in getting their sister commission, the Commerce Commission, to get more down and dirty with competition issues in the service sector.  This makes a lot of sense.

The discussion on ICT is a tough one, it is certainly not independent of the idea of skill/capital based technological change going on at the moment (robots).  In this way, the adoption of ICT and increased productivity does also run into the same concepts about the increased concentration of wealth and falling employment rates (in the short term) that we have heard of overseas – it is possible to make the case that low labour productivity may in fact be a signal of a more equitable distribution, and that separating the two in any way will be a difficult and broader policy knot!  The Productivity Commission itself seems to near this idea, with their indication that winner-takes-all markets matter in their report.

These are important issues, and when the final report comes out the PC will have a detailed case for why they consider the policy recommendations they are making to be the right ones.  The one thing I ask of everyone across the political spectrum is that they are clear with their own value judgments, and that we accept that there may be, likely will be, a trade-off distributional and efficiency considerations.